What investors can learn from how investors read the news

I was on an Amtrak train from Philadelphia to New York late last year when I noticed that the guy sitting next to me kept staring at my laptop screen. To make sure this wasn’t just my imagination, I swiveled the computer slightly out of his view. He then craned his neck to get a better look.

“Can I help you?” I finally asked him.

“That … is … amazing …,” he told me, pointing at the screen. “You know, people would actually pay you good money for this.”

So what did I have up on my screen that was so valuable?

A selfie I took after working out at the gym? Clearly not.

The first page of my novel? Sadly, no.

I was looking at the live traffic data on MarketWatch. Specifically, a list of which stock-quote pages our readers were sitting on.

At any given moment during the U.S. market day, something like 30,000 readers are on our home page, and about another 15,000 are checking stock quotes.

We know one of our stories is doing well when it has more readers in it than the Apple quote page has. Seriously, it takes work to come up with a story angle that MarketWatch readers care about more than they do about Apple’s stock.

We are also able to see the flow of readers in and out of the page: how many more there are at that very instant than the median for that day and time — and how long, on average, they remain on each story or quote page before heading elsewhere. Hint: It’s usually around 20 to 40 seconds — which is probably the most depressing statistic to journalists in 2016.

My fellow passenger, it will not surprise you to hear, was a trader. At first it astonished me that this live traffic data was all that interesting to him. There are plenty of sources to gauge sentiment on a particular stock, even social-media sentiment. MarketWatch’s own Mark Hulbert offers such a measure.

But the Web traffic data was showing something different, I realized. These numbers had nothing to do with the fundamentals. They are a window into the mentals — a quick pulse of interest, anxiety and potential opportunity.

The best traders know how to anticipate how other traders read a given situation, and here in aggregate was a peek inside the retail investor hive mind.

So why am I bothering to tell you all of this? Well, I don’t know if that trader on the train is right, that our traffic data has any value to anyone other than editors like me looking to make sure we have the stories our readers want and need. But I do think investors may be able to learn a thing or two from how investors read the news.

January, for instance, was the market’s worst start to a year in nearly a decade. It also happened to be MarketWatch’s best month ever for traffic. Some 23.5 million unique visitors came to the site, many muttering a whole bunch of four-letter words, and one three-letter word: oil.

Traffic to our various oil futures ticker pages jumped more than 30% in January. In fact, oil overtook Apple in the rankings of top tickers. This had never happened in the time I’ve been with the site.

Yes, there was a lot of interest in China in January, but our readers spoke with their clicks: Oil was the story. Traffic to the Apple quote page, meanwhile, has been down 15% — this despite the best efforts of our good friends at the Federal Bureau of Investigation.

But the No. 1 ticker of 2016 has far and away been that of the Dow Jones Industrial Average , which saw a 113% increase in January. This, to me, was a clear measure of the degree of uncertainty in 2016. MarketWatch columnist Chuck Jaffe had written a piece on why investors should stop paying attention to the Dow. We resurfaced it in January. But that did zero to curb the frantic volume of “DJIA” quote searches.

Some other stats:

• The S&P 500 ticker traffic: up 60%

• Facebook : up 13%

• U.S. dollar : up 9%

There is no shortage of things to criticize about the media in general and financial media in particular. But one complaint I’ve heard everywhere I’ve worked, from small print weeklies to big-city dailies to national websites, is this: “How come you never write about good news?”

The truth is that we do, but no one cares. I’m not saying there’s nothing to the “if it bleeds, it leads” newsroom cliché. And if there’s one universal human indulgence, it’s schadenfreude.

But markets news is a little different. What our traffic data shows is really one of the core principles of behavioral economics in action. A completely rational human being weighs various risks and rewards in terms of utility. But, in case you haven’t noticed, we are not a nation of fully rational human beings.

Instead, we treat risks and rewards unequally, an idea Nobel laureate Daniel Kahneman lays out in what he calls “prospect theory.”

As he explains it: “When directly compared or weighted against each other, losses loom larger than gains. This asymmetry between the power of positive and negative expectations or experiences has an evolutionary history. Organisms that treat threats as more urgent than opportunities have a better chance to survive.”

As brilliant as the ideas of behavioral economics are, I’ve always found the experiments it uses somewhat troubling. They read too much like problems on some standardized test and don’t feel enough like real life. I mean, I hang out with a lot of shady characters, but no one has ever walked up to me in real life and offered to flip a coin and give me $150 if it’s heads, while I’d lose $100 if it’s tails.

But the more I looked through the quote-page traffic and the list of stories that did best in January, it was clear that investor loss aversion was MarketWatch’s gain.

That loss aversion might have been the market’s gain, as well: I would hazard a guess that the market’s strong rebound in February was a contrarian reaction to how extreme investors’ loss aversion was in January. That, in turn, suggests the tantalizing possibility — and I stress possibility here because we’d need to study this further — that, had traffic to the Dow industrials quote page not skyrocketed during the market’s decline, the subsequent recovery would have been far weaker.

Humans’ inability to weigh loss aversion against opportunity, our propensity to pull out of the market at exactly the wrong time and pile into at an even wronger time has prompted behavioral economists such as the Richard Thaler at the University of Chicago to quip that most investors would be better off watching ESPN than CNBC. One of my favorite investing columnists told me recently that if he were really honest he’d publish only one story a year. Not sure I’d go that far.

In fairness to those who criticize our emphasis on negative news, I will concede that one of our most popular columns of the past year was headlined, “If oil drops below $30 a barrel, brace for a global recession.” Many of the most-read oil stories were some variation on the how-low-can-it-go theme: $20? $10? $5? Headlines with variations of the word “bear” tend to do somewhat better than those that say “bull” or “bullish.”

All of this is to say I still don’t know if the trader on the train is right, whether reader traffic data could give investors any sort of edge whatsoever. But it is something we are looking to find a way to surface on our site.

In closing, I will do my part as a member of the media and end this on as depressing, negative a note as possible: It’s 1929 all over again, people!

Seriously, when I showed this piece to some of my colleagues, they all had similar reactions: Though our traffic has leveled off the past two weeks, the shift in pattern suggests the current market recovery may already be running out of steam.

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